An Introduction to ‘The Capital Clone’

“I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting there and trying to dream it up all yourself. Nobody’s that smart.” – Charlie Munger

This is the opening quote from Meb Faber’s Invest with the House. In the book, Meb details the returns an investor would have experienced had they cloned the top 10 holdings of twenty, long-term oriented value investors from 2000 through 2014. On average, a cloning approach beat the S&P 500 by ~10% annually during this time period. Furthermore, one of my favorite super-investors, Mohnish Pabrai, also endorses a cloning approach in many of his lectures. He even developed a strategy, much like Meb, and calls it The Shameless Cloner portfolio. As a result, this information led me on a journey to discover the hidden power that 13F filings held for investors.

In short, the SEC requires that any fund managers who manage over $100M disclose their prior quarter holdings to the public every February 14th, May 15th, August 14th and November 14th. These disclosures are known as 13Fs and allow the public to see what stocks the best investors in the world are investing in. For those of us who have dreamed of investing with the likes of Warren Buffett, Mohnish Pabrai, David Tepper, and David Einhorn, to name a few, 13Fs give us that opportunity. Thus, The Capital Clone was born.

My Plan

Therefore, I plan to allocate ~25% of my portfolio to a cloning strategy and track it here. I will implement this strategy using a Roth IRA at Motif Investing. Motif Investing allows investors to build their own motif, or ‘mutual fund’ of sorts. Each motif can comprise of up to 30 stocks or mutual funds. My motif will consist of 24 to 30 holdings, depending on the number of cloned managers and associated holdings. Hopefully this strategy will generate some great dialogue and comments.

To follow this strategy, keep reading at The Capital Clone

~ Holden Alexander

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4 Replies to “An Introduction to ‘The Capital Clone’”

  1. Haha that’s definitely a unique spin on this topic. Although the problem with following more active fund managers like David Tepper is that they turnover their portfolios so quickly. By the time their filings are released, they might have bought the position 2 months ago.

    1. Holden Alexander says: Reply

      Correct! That is why I am not following Tepper. He trades more frequently than I am comfortable following. His Top 10 Holdings have an average holding period of 1.90 quarters (~6 months). That is not long enough for me to initiate a long-term clone. Plus, he does not fit only one style. He goes where the opportunity is and that is harder to track in a 13F.

  2. And also those filings are ridiculously hard to follow. Funds like his have hundreds of positions, and it’s impossible to know the size of each position because you don’t know his AUM.

    1. Holden Alexander says: Reply

      Correct. But that’s why the back-testing helps verify whether their equity picks will outperform or not. I am looking forward to cloning them moving forward.

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